WisdomTree Launches Japan SmallCap Smart Beta ETF
Thursday 12th July '18
DFJ Offers Investors Exposure to Japan’s Local Economy
WisdomTree, the exchange traded fund ("ETF") and exchange traded product ("ETP") sponsor, today announced the launch of the WisdomTree Japan SmallCap Dividend UCITS ETF on the London Stock Exchange. The fund seeks to track the price and yield performance of the WisdomTree Japan SmallCap Dividend Index and has a net expense ratio of 0.48%.
Fears at the prospect of a global trade war has caused huge volatility in equity markets in 2018 but for those looking to maintain long-term allocations to equities, there are segments of the equity market that tend to be less affected by the current issues. The investment case for Japanese small-cap companies lies in the fact that they are more locally oriented and provide greater exposure to the local economy’s endogenously driven growth cycle, and with strengthening domestic demand, the index’s constituents derive more than 80% of their weighted average revenue inside Japan, compared with 57% for Japanese large-caps.
Christopher Gannatti, WisdomTree Head of Research in Europe said, “We think Japanese small-caps provide the purest way to tap into the local economic growth prospects. After decades of deflation, deleveraging and demand contraction, Japan’s domestic demand is now driving growth. A structural shortage of labour is forcing improvements in both the quality of employment and the incomes earned from employment and the government are delivering on a policy switch to ‘Fiscal Dominance’ and Japanese small-caps have performed strongly across multiple time horizons in the past ten years, offering differentiation relative to large-caps alone.”
“With the Yen searching for a firm direction over the past few years, many investors have been uncertain as to the best way to invest in Japanese equities. If investors want to try to side-step the Yen’s movements and benefit from growth within Japan, small-caps can offer a potential, domestically-focused opportunity,” he said.
Rafi Aviav, WisdomTree Head of Product Development in Europe, said, “The WisdomTree Japan SmallCap Dividend UCITS ETF taps into the Japanese domestic economy while offering exposure to the size and value factors, which have been the clear winners from a factor perspective in Japan in the past decade. The index has a live track record of more than 10 years, through which it has outperformed its small-cap benchmark by 1.7% per annum and its large-cap benchmark by 3.4% per annum, while maintaining low correlations (around 0.5) with European and US markets, true to its domestic focus. We believe this fund offers a unique way to access Japanese small-caps and it is particularly relevant in these times, when global free trade may be challenged.”
Japan SmallCap Dividend UCITS ETF: Under the Hood
- Index universe: Constituents must be listed on the Tokyo Stock Exchange and have paid at least $5 million in gross cash dividend on shares of the common stocks in the prior annual cycle to annual reconstitution and they must have a market capitalization of at least $100 million on screening date.
- Constituent selection: From the above universe, the 300 largest companies by market capitalization are removed to create the index. The selection parameters are therefore quite broad.
- Weighting: Weighting is on the basis of cash dividends paid (dividend-per-share x number of shares outstanding). There is a cap of 2% to any single constituent and a cap of 25% to any single sector.
- Volume screen: WisdomTree’s process is also sensitive to the liquidity of underlying constituents, ensuring that constituents with larger weights have greater liquidity to support those bigger exposures.
|Share Class Name||Exchange||Trading Currency||Exchange Code||ISIN|
|WisdomTree Japan SmallCap Dividend UCITS ETF - USD||LSE||USD||DFJ||IE00BFXYK923|
|WisdomTree Japan SmallCap Dividend UCITS ETF - USD Acc||LSE||USD||DFJA||IE00BFXYKD63|
Size: Characterised by smaller companies rather than larger companies by market capitalization. This term is also related to the size factor, which associates smaller market cap stocks with excess returns vs. the market over time.
Value: Characterised by lower price levels relative to fundamentals, such as earnings or dividends. Prices are lower because investors are less certain of the performance of these fundamentals in the future. This term is also related to the value factor, which associates these stock characteristics with excess returns vs. the market over time.
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Notes to Editors
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